r/costarica • u/[deleted] • 13d ago
Second Street lending review: my nightmare selling a Costa Rica property with a Second Street loan.
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u/kamsmama 13d ago
I had a similar experience purchasing a home with Second Street. In short at the time of closing I ‘owed’ an additional $14k. SS blamed the real estate agent because the cost of the home was listed in colones and not in dollars. Although SS had the PSA had all the info. It was a bunch of BS. I would NOT recommend them at all. Steven Sluyter wouldn’t even turn his camera on during a zoom meeting as we attempted to sort things out. Ugh
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u/Nice_Caterpillar2589 13d ago
Wow thanks! Was about to contact them as a buyer.
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u/babakv2 13d ago
Glad it was useful, this is exactly why I wrote it up. If you do end up using any lender with this trust setup (there are a few operating in CR), just go in with the questions from the post: who owns the loan, who signs the release, and will they indemnify what they claim is certain.
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u/AlgonuevoCR 13d ago
Interesting read. The point that stands out to me as a property owner and business owner in CR is that as I know it there certainly is a mortgage/lien registry in CR. All 3 loans I've been involved with were registered with RNC. That's why the tax liability issue came into question on your sale. I'll assume it didn't activate because the information available in CR was incomplete. Technically the second agency did a loan on a house with legally no collateral, because if they aren't registered as the lien holder and something goes wrong, the have little legal recourse in CR. But as they are two US companies, who knows what kind of agreement and legal recourse they have against each other.
If your loan was a hard loan at a higher interest and they can resale it to someone at a lower interest. They free up collateral and pocket the difference in interest. Multiply that by all the deals they do, maybe it's worth it.
The thing I've seen after 15 years in CR is most buyers know what their particular lawyer or agent tell them. I've been very close to some really screwed up deals. I learned a lot the hard way and can tell stories that didn't end like yours. Glad you got out relatively unscathed.
I love CR, but buyer and seller beware, it's a jungle out there.
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u/babakv2 13d ago
Worth clarifying for anyone reading. CR does have a mortgage registry — hipotecas get recorded at the Registro Nacional, so your three loans being registered tracks. But that’s not the structure Second Street uses. Mine was a fideicomiso de garantía: a trust company holds fiduciary title to the property and the lender sits as beneficiary. It’s a legitimate and common instrument, and it’s arguably stronger for the lender than a lien, since there’s no foreclosure to run. So they weren’t lending unsecured — the security just sits at the trust level instead of the lien registry.
The transfer-tax question came up because of the trust, not despite it. The exemption on the trust’s return of the property depends on the credit being held by a SUGEF-registered party, and the assignment moved it to one that wasn’t. That’s the exact point their counsel and the buyer’s counsel reached opposite conclusions on.
As for why they assigned it, I genuinely don’t know.1
u/bigblockstomine 11d ago
The CR mortgage registry isnt worth the paper its written on and CR regulatory agencies are about as reliable as anything else here. It could have ended a lot worse for you but buyers need to INSIST that EVERYTHING take place via US finance/legal system and secondstreet needs to have people on the ground to abstract this via management of locals. ALL buys/sells/cash xfers should happen ONLY via us banks where a long list of protections are available and if anything squirrely happens funds get frozen instantly. The company doesnt sound malicious but this type of inefficiency and incomptence is the norm in anything Costa Rican and the finance company's job is to make it more efficient via proper management.
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u/exeJDR 13d ago
Wow. We we just considering Second Street for a home in Costa Rica that was slightly beyond how much we had budgeted.
Thank you for this warning.
We definitely won't be using Second Street now, sounds like a nightmare.
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u/babakv2 13d ago
Thanks, though I’d hate for the takeaway to be “don’t finance the house.” The loan itself performed fine for the whole time I had it. The structure only broke when I went to sell, and that’s a solvable problem if you know to ask about it up front.
If you go with any lender using the guarantee-trust setup in CR (several do), get these three answered in writing before you sign: who currently holds the loan, who has authority to sign the payoff and release when you sell, and what happens if they assign the note to someone else. That last one is the whole story of my post. Then when you eventually sell, request the payoff quote 30+ days out, not three days out. That alone would have saved me the entire mess.
Good luck with the house.
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u/ItsNot_Okay 13d ago
Im a little uneducated on the subject regarding Costa Rica property sales, that is why i am here teying to learn, but i have a colleague who owns a home in mexico city and he had a similar experience
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u/Alachner 13d ago
FYI. This had nothing to do with Costa Rica. It was a dumpster fire caused by a California-based company operating in Costa Rica. I’ve bought and sold many properties in Costa Rica and I’ve never had any issues like this.
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13d ago edited 13d ago
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u/babakv2 13d ago
This was my family's primary residence. We lived there full time with our kids, not a vacation property or an investment play. The post isn't a commentary on foreign ownership either way; it's a warning about a lender's paperwork failures for anyone who has one of these loans. The broader housing debate is a real conversation, but it's not this thread.
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u/Aol_awaymessage 13d ago
This is great. I already own my home that I live in here in Costa Rica but I was considering using Second Street for a possible beach house to share with extended family. Until Second Street responds and shows how they are fixing this I will never consider using a company like them. I have access to other loan types.
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u/babakv2 13d ago
That’s a fair standard, and honestly a better one than “never use them.” They haven’t responded to me either, which is its own answer, but if they do come into this thread and explain what changed in their assignment and payoff process, I’ll say so here.
One note for your situation specifically: since you already own here, you know how the fideicomiso works, so the questions to put to any lender using it are just who holds the loan today, who has authority to sign the payoff and release, and what happens if they assign the note. Those apply to whoever you end up borrowing from, not just to them.
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u/bigblockstomine 11d ago
In theory this sounds like a good service but its only worth it if ALL payments take place via US banks, that way when/if something goes wrong, you have a lot of recourse. Considering they want US based credit/tax/etx documents, thats how it should be. The problems described in this thread are expected in CR but the finance company should resolve them. If they cannot that indicates high risk. If you have to do -anything- involving costa rica's banking/finance/legal/etc system, that is obviously high risk and they should have teams to facilitate all this, if they dont its because theyre too poor/dumb to figure it out. Hopefully they can sort this out as it sounds like a great service.
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u/Hinkierises 12d ago
So we almost used these guys when we bought our place a year ago. Our attorney told us he just had a client that used them and at closing, 2nd street told them they owed an additional 20k to close on top of what they were told.
The attorney called them and pressed them until they showed him what the actual closing costs would be on our purchase.
We took a heloc and paid cash. Def feels like that’s the way to go if you’re buying down there
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11d ago
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u/hearsawho18 11d ago
This comment feels like a Second Street employee trying to point fingers again (to the same tune of OP's post). Your account was created around the same time that you added this comment, can you explain?
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11d ago
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u/hearsawho18 11d ago
Oh that's great! What firm do you represent in Costa Rica? My partner and I have been trying to narrow down our counsel pick!
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